Today's marketing managers are expected to make complex decisions amid an excess of information and a lack of skills, experience, time and patience. Each marketing decision varies in terms of the problem that has to be solved, the environment in which the problem is solved, and the decision maker who has to solve the problem. To help marketing decision makers make the best possible decisions, marketing science has developed various decision aids, termed Marketing Management Support Systems.
Keywords Decision Aids; Marketing; Marketing Decision-Making; Marketing Management Support Systems (MMSS); Programmability
Marketing: Marketing Decision-Making
Marketing is the process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchange and satisfy individual and organizational objectives. The academic field of marketing formally began shortly after the turn of twentieth century and is now some 100 years old. Due to the sheer volume of products and brands, the ever increasing amount of market segments, the intensity of competition and the overall acceleration of change, marketing decision situations are often complex as decisions need to be made under increasing time pressure.
Decision making, also referred to as problem solving, is the process of recognizing a problem or opportunity and finding a solution to it. Many decisions are relatively simple and routine, but managers are also faced with decisions that can drastically affect the future outcomes of the business. The term Marketing Decision Making refers to the way marketing managers go about making decisions, as well as the decision aids that support marketing managers in the preparation, execution, and evaluation of marketing activities.
It is important that good business decisions are made as wrong decisions can easily lead to the failure of an entire organization. However, decision makers may not have all of the requisite information, skills, experience, time and even patience, to make the best decisions all the time. Even if marketing decision makers do have right type of information, it is likely that they will have too much information, since they are confronted with a constant stream of information about the market and the position of products — with formal data and informal cues about customers, distributors, competitors, and so forth (Wierenga & van Bruggen, 1997).
Faced with these challenges and more, marketers have moved from a reliance on intuition in decision-making, to the use of tools made possible by developments in statistics, model building, knowledge engineering, and information technology. Marketing decision aids, also called Marketing Management Support Systems (MMSSs), were first developed by marketing scientists in the early 1960s. Initial efforts centered on using computers to build complex models that searched for the optimal solution to a problem. The first concept introduced was a simple but robust marketing model that usually required judgmental input from the manager. This was called a decision calculus model. The next concepts were marketing information systems, marketing decision support systems, marketing expert systems, and marketing case-based reasoning systems, among others.
Each marketing decision situation or problem is characterized by three basic factors. These are: (i) the problem that has to be solved; (ii) the environment in which the problem is solved; and (iii) the decision maker who has to solve the problem (Wierenga, van Bruggen & Staelin, 1999).
The Problem that Has to be Solved
The most important problem characteristics are structuredness and programmability; depth of knowledge; and availability of data. The first problem characteristic, structuredness and programmability, involves the extent to which relevant elements of a problem and the relationships among those elements are known. It is the extent to which a decision can be made by using relatively routine procedures instead of more general problem-solving techniques (Perkins & Rao, 1991).
Programmed decisions are routine and structured with a well-defined starting point, a clear goal, and standardized rules for reaching the goal. They are repetitive enough to allow for the establishment of definite procedures to process them, and the decision maker usually knows from the beginning what the solution and outcome will be.
Non-programmed decisions, on the other hand, are ill-structured and have few guidelines. They involve novel problems that cannot be processed by a pre-specified method and require the decision maker to rely on general problem-solving abilities. Neither the appropriate solution nor the potential outcome is known. When making unprogrammed decisions, managers must exercise judgment, which depends on their experience, insight, and intuition.
Examples of relatively programmable and structured marketing problems are sales management and sales-force decisions, and media planning for advertising. Less-structured problems include designing marketing communication, developing a marketing strategy, and introducing new products.
The second problem characteristic, depth of knowledge, refers to generalized knowledge gleaned from scientific research regarding a problem or issue. The third problem characteristic, data, helps decision makers to form an impression of the mechanisms in a market.
The Environment in which the Problem is Solved
Decision environment characteristics, and in particular, time constraints, market dynamics and organizational culture, affect marketing decision-making. When time is short, the quickest way to solve a problem is to consult one's memory and search for similar cases experienced before (Wierenga & van Bruggen, 1997). When the market dynamics feature turbulent market conditions, marketers will find it difficult to understand and interpret what is happening. Stable markets, on the other hand, are more structured and thus easier to understand and interpret.
The organizational culture of a company or department will influence the prevailing attitudes and the approach to doing things, including the approach to decision-making. This will influence the way in which marketing managers go about problem solving in their domain.
The Marketing Decision Maker
The third factor that characterizes the marketing decision situation is the decision maker: His or her cognitive style, experience, education, and skills. Decision makers select, evaluate, and combine information that is available either internally or externally. Cognitive style refers to the process through which a marketing decision maker perceives and processes information. It is the organization of information in memory and the repertoire of rules for using that information. A low-analytical decision maker is more likely to use a decision aid than a high-analytical decision maker.
A decision maker with a high degree of professional experience (like a marketing decision maker) will have dealt with a large number of practical marketing problems and their solutions. Studies comparing experts and novices suggest that experts have more highly developed cognitive structures, which allow for effective problem structuring and successful problem solution.
The effects of experience are more pronounced in less programmed, unstructured decisions than in the more programmed decisions. Experts are likely to understand the uncertainties and consequences of their decisions better than their inexperienced counterparts. Novices, on the other hand, are more likely to use decision aids (Perkins & Rao, 1991). Experts and knowledgeable decision makers are likely to search for more information than normal, selecting information that is relevant and important. They are also better able to acquire information in a less-structured environment, and are more flexible in the manner in which they search for information. They will also agree more than novices regarding what information is important.
On the downside, experts are more likely to focus on rare events, but often at the expense of undervaluing base-rate information. When tasks are extremely unstructured, though, even experts cannot apply known solution strategies. Instead, they must employ heuristics (a method of problem solving that uses trial and error as well as rules of thumb to take shortcuts to a solution), and their judgments are subject to all the biases associated with human judgment processes.
The more relevant the education and skills of a decision maker, the more capable he or she will be in handling decisions. The combination of cognitive style, experience, education and skills of a decision maker results in his or her choice of Marketing Problem-Solving Modes (MPSMs). Different marketing decision makers may use different MPSMs, and the same decision maker may use different modes at different times.
There are four different MPSMs. They are: Optimizing, reasoning, analogizing, and creating. When optimizing, the decision maker has clear insight into the way processes work. This is represented by a mathematical model, which describes the relationships between the relevant variables in a quantitative way. When reasoning, decision makers also translate external events into internal models, which they manipulate.
Analogizing refers to a decision maker's natural inclination to bring to bear the experience gained from solving similar problems. Unlike analogizing, during the creating mode, a marketing decision maker searches for concepts, solutions, or ideas that are novel in order to respond to a situation that has not occurred before (Wierenga & van Bruggen, 1997). The decision maker combines known but previously unrelated facts and ideas in such a way that new ones emerge.
Creating can refer to all aspects of marketing management, including the generation of ideas for new products or services, innovative advertising or sales-promotion campaigns, new forms of distribution, and ingenious pricing. Creativity is often the means for firm survival and growth (Wierenga & van Bruggen, 1997).
When confronted with a single unique decision and no extensive past history, marketing decision makers often rely on the judgments of several individuals. Since it is unlikely that several individuals would agree on the same decision, the marketing manager must process their assessments according to his or her own judgment and the degree of belief assigned to each assessment.
In general, group decision-making allows for the generation of more input and more possible solutions to a situation. There is shared responsibility for the decision and its outcome, so that no single person has total responsibility. The disadvantages are that it often takes a long time to reach a group consensus, and group members may have to compromise in order to reach a consensus.
An interesting group decision-making model is the Delphi estimation process, where anonymous judgments are collected through questionnaires. The median responses are summarized as the group consensus, and this summary is fed back along with a second questionnaire for reassessment. This process retains the advantage of several judges while removing the biasing effects which...
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